December 6, 2000
Dear Shareholder Member:
You are cordially invited to attend the Company's annual meeting at 10:00 A.M.,
local
time, on Wednesday, January 24, 2001 in the Auditorium of our Rockford,
Illinois,
plant. Registration for the meeting will be in the Atrium located at the rear
of the
plant. We invite you to join members of our management team for an informal
social
period from 9:00 A.M. to 9:45 A.M. The formal meeting will begin promptly at
10:00 A.M.
Parking is available directly behind the plant. A map is enclosed with this
notice.
Please complete and return your proxy card or vote via telephone or the
internet
as
soon as possible whether or not you plan to attend.
Sincerely yours,
WOODWARD GOVERNOR COMPANY
John A. Halbrook
Chairman, Board of Directors
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
January 24,2001
The annual meeting of the shareholder members of Woodward Governor Company will
be
held in the Company's Auditorium, 5001 North Second Street, Rockford, Illinois,
on
Wednesday, January 24, 2001, at 10:00 A.M., local time. At the meeting we will:
1. Elect four directors to serve for a term of three years each; and
2. Transact other business that properly comes before the meeting.
Shareholders who owned Woodward stock at the close of business on November 27,
2000
are entitled to vote at the meeting.
We look forward to seeing you at the meeting.
Sincerely,
Carol J. Manning
Corporate Secretary
December 6, 2000
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting in person, please date, sign, and return
your
proxy in the enclosed envelope, or vote via telephone or the internet as soon
as
possible. Prompt response is helpful and your cooperation will be appreciated.
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
Wednesday, January 24, 2001
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Our Board of Directors is soliciting your proxy to vote at our annual meeting
of
shareholder members (or at any adjournment of the meeting). This proxy
statement
summarizes the information you need to know to vote at the meeting.
We began mailing this proxy statement and the enclosed proxy card on or about
December 6, 2000 to all shareholders entitled to vote. The Woodward Governor
Company
Annual Report, which includes our financial statements, is being sent with this
proxy
statement.
Date, time and place of meeting:
Date: January 24, 2001
Time: 10:00 a.m.
Place: 5001 North Second Street
Rockford, Illinois
Record Date Information
Shareholders who owned Woodward common stock at the close of business on the
record
date, November 27, 2000, are entitled to vote at the meeting. As of the record
date,
there were 11,316,377 shares outstanding.
Each share of Woodward common stock that you own entitles you to one vote,
except for
the election of directors. Since four directors are standing for election, you
will
be entitled to four director votes for each share of stock you own. Of this
total,
you may choose how many votes you wish to cast for each director.
Voting Your Proxy
Woodward is again offering shareholders the opportunity to vote by mail, by
telephone
or via the Internet. Instructions to use these methods are set forth on the
enclosed
proxy card.
If you vote by telephone or via the Internet, please have your proxy or voting
instruction card available. The control number appearing on your card is
necessary
to verify your vote. A telephone or Internet vote authorizes the named proxies
in
the same manner as if you marked, signed and returned the card by mail. Voting
by
telephone and via the Internet are valid proxy voting methods under Delaware
law
and
Woodward Bylaws.
If you properly fill in your proxy card and send it to us in time to vote, one
of the
individuals named on your proxy card (your "proxy") will vote your shares as
you
have
directed. If you sign the proxy card but do not make specific choices, your
proxy
will follow the Board's recommendations and vote your shares:
? "FOR" the election of the Board's nominees to the Board of Directors
If any other matter is presented at the meeting, your proxy will vote in
accordance
with his or her best judgment. At the time this proxy statement went to press,
we
knew of no other matters to be acted on at the meeting.
Revoking Your Proxy
You may revoke your proxy by:
? sending in another signed proxy card with a later date,
? notifying our Secretary in writing before the meeting that you have
revoked your
proxy, or
? voting in person at the meeting.
Giving your Proxy to Someone Other than Individuals Designated on the Card
If you want to give your written proxy to someone other than individuals
named on the
proxy card:
? cross out individuals named and insert the name of the individual you are
authorizing to vote, or
? provide a written authorization to the individual you are authorizing to
vote
along with your proxy card.
Quorum Requirement
A quorum of shareholders is necessary to hold a valid meeting. The
presence, in
person or by proxy, at the meeting of holders of shares representing a majority
of
the votes of the common stock entitled to vote constitutes a quorum.
Abstentions and
broker non-votes are counted as present for establishing a quorum. A broker
non-vote
occurs when a broker votes on some matters on the proxy card but not on others
because he or she is not permitted to vote on that item absent instruction from
the
beneficial owner of the shares and no instruction is given.
Vote Necessary for Action
Directors are elected by a plurality vote of shares present at the
meeting, meaning
that the four director nominees receiving the most votes will be elected.
Other action is by an affirmative vote of the majority of shares present
at the
meeting. Abstentions and broker non-votes will be treated as unvoted in
matters
other than director elections.
BOARD OF DIRECTORS
Structure
Our Board of Directors is divided into three classes for purposes of
election. One
class is elected at each annual meeting of shareholders to serve for a three-
year
term.
Directors elected at the 2001 Annual Meeting of Shareholders will hold
office for a
three-year term expiring in 2004 or when their successors are elected. Other
directors are not up for election at this meeting and will continue in office
for the
remainder of their terms.
If a nominee is unavailable for election, proxy holders will vote for
another nominee
proposed by the Board.
Proposal 1 -- Election of Directors
Directors Up for Election at This Meeting for Terms Expiring in 2004:
? Vern H. Cassens, 68, is retired Senior Vice President and Chief Financial
Officer
of the Company. Mr. Cassens has been a director of the Company since 1977.
? Thomas W. Heenan, 69, is a retired partner in the law firm of Chapman and
Cutler,
Chicago, Illinois. Mr. Heenan has been a director of the Company since 1986.
? Michael H. Joyce, 60, is President and Chief Operating Officer of Twin
Disc,
Incorporated, a designer and manufacturer of heavy-duty transmission
equipment.
Other directorships: The Oilgear Company. Mr. Joyce was elected a director of
the Company by the Board of Directors effective October 1, 2000 to replace Carl
J.
Dargene, who retired on September 30, 2000.
? Lou L. Pai, 53, is Chairman and Chief Executive Officer of Enron Energy
Systems, a
provider of energy outsource solutions, and Chairman of TNPC, Inc., a provider
of
energy to residential users through its subsidiary, The New Power Company. Mr.
Pai has been a director of the Company since 1999.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES PRESENTED IN
PROPOSAL 1.
Directors Remaining in Office Until 2003:
? J. Grant Beadle, 67, is retired Chairman and Chief Executive Officer of
Union
Special Corporation, a manufacturer of industrial sewing machines. Other
directorships: William Blair Mutual Funds, Inc., and each of the eleven
related
mutual funds. Mr. Beadle has been a director of the Company since 1988.
Paul Donovan, 53, is Senior Vice President and Chief Financial Officer of
Wisconsin Energy Corporation, a holding company with subsidiaries in utility
and
non-utility businesses, including electric and natural gas energy services,
pump
manufacturing, waste-to-energy and real estate businesses. Other
directorships:
AMCORE Financial, Inc. Mr. Donovan was elected a director of the
Company by the
Board of Directors on November 21, 2000.
? Lawrence E. Gloyd, 68, retired in March 2000 as Chairman and Chief
Executive
Officer and at that time was also named Chairman Emeritus of CLARCOR Inc.,
Rockford, Illinois, a manufacturer of filtration and consumer packaging
products.
Other directorships: AMCORE Financial, Inc., CLARCOR Inc., Genlyte Thomas
Group
LLC and Thomas Industries, Inc. Mr. Gloyd has been a director of the Company
since 1994.
? J. Peter Jeffrey, 67, is retired Vice President of Development at Father
Flanagan's Boys' Home in Boys Town, Nebraska. Mr. Jeffrey has been a director
of
the Company since 1981.
Directors Remaining in Office Until 2002
? John A. Halbrook, 55, is Chairman and Chief Executive Officer of the
Company.
Other directorships: AMCORE Financial, Inc. Mr. Halbrook has been a director
of
the Company since 1991.
? Rodney O'Neal, 47, is Executive Vice President of Delphi Automotive
Systems, a
supplier of automotive interior systems and President of the Safety, Thermal &
Electrical Architecture Sector. Mr. O'Neal has been a director of the Company
since 1999.
? Michael T. Yonker, 58, retired in June 1998 as President and Chief
Executive
Officer of Portec, Inc., which had operations in the construction equipment,
materials handling and railroad products industries. Other directorships:
Modine
Manufacturing Company, Inc. and Geneva Steel Corporation. Mr. Yonker has
been a
director of the Company since 1993.
Board Meetings and Committees
The Board of Directors met seven times during 2000; all directors attended
more than
75% of the aggregate of the total meetings of the Board of Directors and all
committees of the Board on which they served except for Messrs. O'Neal and Pai.
Audit Committee
J. Peter Jeffrey, chairman
J. Grant Beadle
Vern H. Cassens
Thomas W. Heenan
Michael T. Yonker
The Audit Committee recommends the engagement of independent accountants
to audit
Woodward's books, reviews the scope and approach of both the annual independent
audit
and internal audits, and reviews Woodward's system of internal accounting
controls.
The Committee held three meetings during 2000.
Compensation Committee
Michael T. Yonker, chairman
J. Grant Beadle
Lawrence E. Gloyd
Thomas W. Heenan
Rodney O'Neal
The Compensation Committee recommends the base compensation of Woodward's
officers
and key personnel, and evaluates the performance of and reviews the results of
the
annual member evaluation for those individuals. The Committee held two meetings
during 2000 prior to the appointment of Mr. O'Neal to the Committee. Carl J.
Dargene
served as chairman of the Compensation Committee until his retirement on
September
30, 2000. Mr. Yonker was appointed chairman of the Committee on November 9,
2000.
Executive Committee
John A. Halbrook, chairman
J. Grant Beadle
Lawrence E. Gloyd
The Executive Committee exercises all the powers and authority of the
Board of
Directors in the management of the business when the Board is not in session
and
when
in the opinion of the Chairman the matter should not be postponed until the
next
scheduled Board meeting. The Committee may declare cash dividends.
The Committee
may
not authorize certain major corporate actions such as amending the Certificate
of
Incorporation, amending the Bylaws, adopting an agreement of merger or
consolidation
or recommending the sale, lease or exchange of substantially all of Woodward's
assets. The Committee held one meeting during 2000.
Selection Committee
J. Grant Beadle, chairman
John A. Halbrook
Thomas W. Heenan
Lou L. Pai
The Selection Committee recommends qualified individuals to fill any
vacancies on the
Board. The Committee held one meeting during 2000.
No procedures have been established for the Selection Committee to
consider nominees
recommended by shareholder members.
Stock Option Committee
Michael T. Yonker, chairman
J. Grant Beadle
Lawrence E. Gloyd
The Stock Option Committee administers the Company's Long-Term Incentive
Compensation
Plan, determining and taking all action, including granting of all incentives
to
eligible working members, in accordance with the terms of the Plan. The
Committee
held one meeting during 2000.
All actions by committees are reported to the Board at the next scheduled
meeting and
are subject to approval and revision by the Board. No legal rights of third
parties
may be affected by Board revisions.
Director Qualifications
The Company's Bylaws provide that:
? each director shall retire on September 30th following his seventieth
birthday
unless approved otherwise by the Board,
? no person may serve as a director unless he or she agrees to be guided by
the
philosophy and concepts expressed in our Constitution, and
? Woodward must receive adequate notice regarding nominees for directors. A
copy of
the notice requirement in Section 2.8 is attached as Exhibit A.
Director Compensation
We do not pay directors who are also Woodward officers additional
compensation for
their service as directors. In 2000, compensation for non-employee directors
included the following:
a monthly retainer of $1,850
Board and Committee members receive $1,000 for each meeting attended
Committee chairmen receive $1,350 for each Committee meeting attended
expenses of attending Board and Committee meetings
Pursuant to Outside Director Stock Purchase Agreements entered into by Mr.
Joyce, Mr.
O'Neal and Mr. Pai, we sold Treasury Shares at the closing price on the dates
of
purchase. In payment of the purchase price, non-interest bearing notes were
signed
and will be repaid by application of each director's monthly retainer. The
amount of
indebtedness outstanding at November 27, 2000: Mr. Joyce, $109,132; Mr. O'Neal,
$75,829 and Mr. Pai, $81,397.
Compensation Committee Interlocks and Insider Participation
Mr. Dargene was Chairman of the Board of AMCORE Financial, Inc. and a
Woodward
director during fiscal year 2000, and served as chairman of the Company's
Compensation Committee until September 30, 2000. In the ordinary course of its
business, Woodward maintains a normal commercial banking relationship with
AMCORE
Bank N.A., Rockford, a wholly-owned subsidiary of AMCORE Financial, Inc. The
maximum
amount of borrowings outstanding at any time during 2000 reached $6,325,000.
Interest
has been charged at floating rates based on standard market indices. Mr.
Halbrook,
Chairman and Chief Executive Officer and a director of Woodward, serves on the
Board
of Directors of AMCORE Financial, Inc. but does not serve on its Compensation
Committee.
SHARE OWNERSHIP OF MANAGEMENT
The following table shows how much Woodward stock is owned, as of November
27, 2000,
by each director, each executive officer named in the Summary Compensation
Table, and
all directors and executive officers as a group.
Ownership of Common Stock___
Name Number Percent
J. Grant Beadle 5,956 0.05
Stephen P. Carter 73,465 (1) 0.65
Vern H. Cassens 77,300 (1) 0.68
Paul Donovan 0 0.00
Ronald E. Fulkrod 30,677 (1) 0.27
Thomas A. Gendron 34,246 (1) 0.30
Lawrence E. Gloyd 6,292 0.06
John A. Halbrook 236,191 (1) 2.09
Thomas W. Heenan 18,836 0.17
J. Peter Jeffrey 6,524 0.06
Michael H. Joyce 2,792 0.02
Rodney O'Neal 4,553 0.04
Lou L. Pai 4,496 0.04
C. Phillip Turner 104,072 (1) 0.92
Michael T. Yonker 6,036 0.05
All directors and executive
officers as a group 619,399 (1) 5.47
(1) Includes the maximum number of shares which might be deemed to be
beneficially
owned under rules of the Securities and Exchange Commission. Includes
options
to purchase shares of Common Stock as follows: Mr. Carter 69,460; Mr. Cassens
34,080; Mr. Fulkrod 19,582; Mr. Gendron 32,824; Mr. Halbrook 222,825; and Mr.
Turner 72,158. Also includes shares (does not include fractional shares)
allocated to participant accounts of executive officers under the Woodward
Governor Company Member Investment and Stock Ownership Plan. The Plan directs
the Trustee to vote the shares allocated to participant accounts under the
Woodward Stock Plan portion of the Plan as directed by such participants and to
vote all allocated shares for which no timely instructions are received in the
same proportion as the allocated shares for which instructions are received.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of our records, all reports required to be filed
pursuant to
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") were
filed
on a timely basis except that a Form 4 was inadvertently filed late for Vern H.
Cassens.
PERSONS OWNING MORE THAN FIVE PERCENT OF WOODWARD STOCK
(As of November 27, 2000)
Ownership of Common Stock
Principal Holders Number Percent
Woodward Governor Company
Profit Sharing Trust
5001 North Second Street
Rockford, Illinois 61125-7001 1,890,979 (1) 16.71%
Royce & Associates, Inc.
Royce Management Company
Charles M. Royce
1414 Avenue of the Americas
New York, New York 10019 867,396 (2) 7.66%
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202 587,600 (3) 5.19%
(1) Shares owned by the Woodward Governor Company Profit Sharing Trust
are held in
its Member Investment and Stock Ownership Plan (the "Plan"). Vanguard
Fiduciary
Trust serves as Trustee of the Profit Sharing Trust. Of the total shares held
in the Profit Sharing Trust, 1,672,342 shares of Common Stock are allocated to
participant accounts and the rest of the shares will be allocated to
participants as the principal and interest on the current outstanding loan to
the Plan are repaid. The Plan directs the Trustee to vote the shares allocated
to participant accounts under the Woodward Stock Plan portion of the Plan as
directed by such participants and to vote all allocated shares for which no
timely instructions are received in the same proportion as the allocated shares
for which instructions are received. The remaining shares in the Plan are voted
by the Trustee as directed by the Plan's Administrative Committee. In the event
of a tender or exchange offer, participants have the right individually to
decide whether to tender or exchange shares in their account. The Plan directs
the Trustee to tender or exchange all allocated shares for which no timely
instructions are received in the same proportion as the allocated shares with
respect to which it does receive directions. The remaining unallocated shares
are tendered or exchanged by the Trustee as directed by the Plan's
Administrative Committee.
(2) Royce & Associates, Inc. has advised the Company that it has sole
investment
power and sole voting power for 836,896 shares; Royce Management has sole
investment power and sole voting power for 30,500 shares.
(3) T. Rowe Price Associates, Inc. has advised the Company that it has
sole
dispositive power for the entire holding of 587,600 shares and has sole
voting
power for 84,900 shares. These securities are owned by various individual and
institutional investors which T. Rowe Price serves as investment adviser with
power to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Exchange Act, T. Rowe Price is
deemed to be a beneficial owner of such securities; however, T. Rowe Price
expressly disclaims that it is, in fact, the beneficial owner of such
securities.
COMMON STOCK PERFORMANCE
The following Performance Graph compares Woodward's cumulative total
return on its
Common Stock for a five-year period (years ended September 30, 1996 to
September
30,
2000) with the cumulative total return of the S&P SmallCap 600 Index and the
S&P
Manufacturing Diversified Index.
TOTAL RETURN TO SHAREHOLDERS
(INSERT NEW COMPARISON INDICES GRAPH HERE)
The Performance Graph included in last year's proxy statement compared
Woodward's
cumulative total return to the cumulative total return of the S&P 500 Index and
the
S&P Machinery Diversified Index. The change in the comparison indices was made
because the portfolio characteristics of the S&P SmallCap 600 Index and the S&P
Manufacturing Diversified Index are such that these indices are more
appropriate
as a
basis of comparison to Woodward. The following Performance Graph compares
Woodward's
cumulative total return on its Common Stock for a five-year period (years ended
September 30, 1996, to September 30, 2000) with the cumulative total return of
the
indices used last year.
TOTAL RETURN TO SHAREHOLDERS
(INSERT PREVIOUS COMPARISON INDICES GRAPH HERE)
Each graph assumes that the value of the investment in Woodward's Common
Stock and
each index was $100 on September 30, 1995 and that all dividends were
reinvested.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and administers Woodward's compensation
program.
This program includes guidelines to recognize achievement of both Company and
individual performance goals as an integral part of the compensation program
for
key
management personnel. Market-based compensation for key management positions
recognizing experience and competence level is determined through the use of
salary
surveys; this process establishes base salary and target incentive (variable)
compensation for the individual. Woodward's stock performance is not
specifically
considered in determining base salary.
Compensation Structure and Components
? individuals are assigned to one of 13 salary grade ranges based upon their
position
? base salary is set within the range based upon actual job
responsibilities,
performance and experience in the job
? annual incentive compensation targets of at least 15%, but not more than
70% of
base salary are established
? level of incentive compensation is tied to salary grade
Base Salary
Base salary, other than that of Woodward's Chairman and Chief Executive
Officer, is
determined by reviewing his recommendations, which are based on:
? executive compensation reviews prepared by outside compensation
consultants
? individual performance based on experience, responsibilities, management
and
leadership abilities, and job performance
The Compensation Committee's determination of base salary for fiscal 2000
was
designed to accomplish two goals:
? to offer competitive compensation to attract, retain and motivate a high-
quality
senior management team
? to link total annual cash compensation to individual performance
Annual Incentive Compensation
The Compensation Committee consults with the Chairman and Chief Executive
Officer
regarding eligibility of executive officers and key management personnel for
participation in this program, determining the appropriate performance goals
and
confirming attainment or lack thereof.
If certain minimum target results are not achieved, no annual incentive
will be paid.
If targeted levels are attained, annual incentive levels range from 15% to 70%
of
base salary of participants. In the case of outstanding performance, each
participant
has the opportunity to significantly increase his or her incentive compensation
above
the targeted level.
Determination of incentive compensation is based on:
? overall financial performance of the Company or individual groups or
operating
units
? achievement of short-term objectives
? direct individual performance
Stock Options
The Woodward Governor Company 1996 Long-Term Incentive Compensation Plan
(the "Plan")
was established to further Woodward's long-term growth and profitability by
offering
long-term incentives to certain key management worker members. By providing an
equity position in the Company, the Compensation Committee believes that
participants' interests will be better aligned with those of the Company's
shareholders.
Provisions of the Plan are:
? authorization to grant both incentive and nonqualified stock options
? award is based on Woodward's performance and the participant's present and
potential contributions to that performance
? option price of shares is determined at the date of the grant and will not
be less
than the fair market value as quoted on the Nasdaq National Market on that date
In fiscal 2000, 25 worker members participated in the Plan.
Long-Term Management Incentive Compensation Plan
In fiscal 2000, a long-term performance-based compensation plan was
established.
Eligibility for long-term performance cash incentive compensation is limited to
a few
top-level executives as determined by the Compensation Committee. The
Compensation
Committee sets appropriate long-term performance goals and confirms attainment
or
lack thereof. The performance goals are measured over one initial two-year
cycle and
then over three-year cycles and encourage consistent, sustainable growth.
A target award is established for each eligible executive based upon salary
grade.
Target awards range from 40% to 50% of the executive's base salary. A
threshold
level of performance is established below which the executive receives no
incentive
award. Once threshold performance is achieved the executive receives a minimum
award
equal to 5% to 10% of the target award. Above threshold performance the award
increases proportionally so that at the target performance level the executive
receives 100% of the target award. The award opportunity continues to increase
above
target to a practical maximum of 200% of the target award.
Long-term cash award opportunities are determined at the beginning of each
performance period and are based on goals associated with:
? average annual growth in earnings per share
? average annual return on invested assets
Compensation of the Chairman and Chief Executive Officer
The compensation of John A. Halbrook, Woodward's Chairman and Chief Executive
Officer, was determined in the same manner as for all other executive officers.
Mr.
Halbrook's base salary in 2000 was $448,700.
Mr. Halbrook's incentive compensation for 2000 of $471,135 was entirely
based on
total Company performance as measured by shareholder value created. Shareholder
value
created was calculated using combined increased earnings, improvement in
utilization
of receivables andinventory, and investment in capital assets.
Mr. Halbrook was also granted options to purchase 40,000 shares of Woodward
Governor
Company Common Stock.
Mr. Halbrook is a participant in the newly-established Long-Term Management
Incentive
Compensation Plan. In accordance with Plan guidelines, fiscal year 2000
represents
one-half of the initial two-year performance period and one-third of the first
three-
year performance period to be measured against long-term performance goals
established by the Committee. The amount of any incentive award will be
determined
and paid at the end of fiscal year 2001 for the initial two-year period and at
the
end of fiscal year 2002 for the three-year period.
Compensation Committee: Michael T. Yonker, Chairman
J. Grant Beadle
Lawrence E. Gloyd
Thomas W. Heenan
Rodney O'Neal
EXECUTIVE COMPENSATION
The following table sets forth a summary for the last three fiscal years of the
cash
and non-cash compensation paid to John A. Halbrook, Woodward's Chairman and
Chief
Executive Officer, and to each of the other four most highly compensated
executive
officers.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
Other Securities
Annual Underlying All Other
Name and Principal Position Year Salary Bonus (1) Compensation(2)
Options (#) Compensation (3)
John A. Halbrook 2000 $447,431 $471,135 -- 35,000 $49,988
Chairman and Chief 1999 415,506 696,226 -- 50,000
46,316
Executive Officer 1998 392,002 138,062 -- 79,515 43,600
C. Phillip Turner 2000 231,544 46,167 -- 15,000 33,649
Vice President 1999 214,994 219,519 -- 20,000 31,675
Aircraft Engine Systems 1998 191,100 168,422 -- 24,828
28,552
Stephen P. Carter 2000 208,283 138,515 -- 13,000 25,641
Vice President, Chief 1999 190,008 233,484 -- 18,000
23,996
Financial Officer 1998 160,212 69,650 -- 27,610 19,808
and Treasurer
Ronald E. Fulkrod 2000 167,094 162,432 -- 8,000 25,432
Vice President 1999 136,000 68,250 -- 5,000 20,771
Industrial Controls 1998 122,200 17,767 -- 1,682
18,398
Thomas A. Gendron 2000 168,251 167,765 -- 8,000 20,658
Vice President 1999 133,975 81,198 -- 9,000 18,036
Industrial Controls 1998 109,403 88,271 -- 10,944
13,386
(1) Includes amounts deferred pursuant to the Unfunded Deferred Compensation
Plan
No. 2.
(2) No executive officer received personal benefits valued at more than
either
10%
of cash compensation or $50,000.
(3) Company contributions to the Member Investment and Stock Ownership Plan,
Retirement Income Plan and Unfunded Deferred Compensation Plans are as follows:
Member Investment and Stock Ownership Plan
Officer 2000 1999 1998
Halbrook $13,750 $13,000 $13,000
Turner 13,877 13,524 13,491
Carter 13,917 13,563 12,229
Fulkrod 13,052 10,789 9,550
Gendron 13,058 12,095 8,639
Retirement Income Plan
Officer 2000 1999 1998
Halbrook $ 9,180 $ 8,480 $ 8,320
Turner 13,090 12,160 12,000
Carter 8,670 8,000 7,579
Fulkrod 12,380 9,983 8,848
Gendron 7,599 5,941 4,747
Unfunded Deferred Compensation Plans
Officer 2000 1999 1998
Halbrook $27,058 $24,836 $22,280
Turner 6,682 5,992 3,061
Carter 3,055 2,343 0
Fulkrod 0 0 0
Gendron 0 0 0
Under a plan closed in 1971, Mr. Fulkrod and Mr. Turner are eligible for an
annual benefit of $283 at normal retirement.
Transitional Compensation Agreements
In September 1999, Woodward approved transitional compensation agreements with
Messrs. Halbrook, Carter and Turner that become operative only upon a change in
control or other specified event. For purposes of these agreements, a change
in
control occurs if:
? any person, entity, or group (with certain exceptions) becomes the
beneficial
owner of 15% or more of the outstanding shares of Woodward common stock; or
? there is a change in a majority of the Board during any two-year period
other than
by election or nomination by a vote of two-thirds of the Board members as of
the
beginning of the period; or
Woodward's shareholders approve a merger, consolidation, sale of assets or
share
exchange resulting in our shareholders owning less than 51% of the combined
voting
power of the surviving corporation following the transaction; or
? our shareholders approve a liquidation or dissolution.
Following a change in control, Woodward will continue to employ the executive
for a
maximum period of two years in substantially the same position, for
substantially the
same compensation and benefits. If the executive's employment is terminated by
Woodward (other than for cause or due to death or disability), or the executive
terminates with good reason (as defined in the agreement), he or she receives
an
amount (payable in a lump sum) equal to 300% of each of (1) the executive's
annual
base salary, (2) highest annual bonus in the last three years, and (3) the sum
of the
Member Investment and Stock Ownership Plan, Retirement Income Plan and Unfunded
Deferred Compensation Plan annual contributions made or credited for the
benefit
of
the executive. Member benefits shall be continued at Woodward's expense for a
period
of three years after the date of termination. Outplacement services will be
provided
at Woodward's expense as well as tax preparation services for the executive's
taxable
year in which the termination occurred.
If the benefits and amount payable to the executives are subject to federal
excise
tax, the executive officers will also be entitled to receive an additional
payment so
that they will receive (on a net basis) the same amount that they would have
received
absent the applicability of the excise tax.
STOCK OPTIONS
The following table shows stock options granted during 2000 under the Woodward
Governor Company 1996 Long-Term Incentive Compensation Plan to the individuals
named
in the Summary Compensation Table:
OPTION GRANTS IN FISCAL YEAR 2000
Individual Grants
Number of % of Total Potential Realizable Value
Securities Options at Assumed Annual Rates of
Underlying Granted to Stock Price Appreciation
Options Employees For Option Term (3)
Granted in Fiscal Exercise Expiration
Name (1) Year Price (2) Date 5%($)
10%($)
John A. Halbrook 35,000 24.12% $24.75 11/14/2009 $544,780
$1,380,579
C. Phillip Turner 15,000 10.34% $24.75 11/14/2009 233,477
591,677
Stephen P. Carter 13,000 8.96% $24.75 11/14/2009 202,347
512,787
Ronald E. Fulkrod 8,000 5.51% $24.75 11/14/2009 124,521
315,561
Thomas A. Gendron 8,000 5.51% $24.75 11/14/2009 124,521
315,561
(1) Consists of non-qualified options issued for a ten-year term.
(2) Closing price of Common Stock as reported on the Nasdaq National Market as
of
the date of grant.
(3) The potential realizable value is calculated based on the term of the
option at
its time of grant (ten years). It is calculated assuming that the stock price
on the date of grant appreciates at the indicated annual rate compounded
annually for the entire term of the option and the option is exercised and sold
on the last day of its term for the appreciated stock price. No gain to the
optionee is possible unless the stock price increases over the option term.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in 2000 by the
individuals named in the Summary Compensation Table and the value of their
unexercised options at September 30, 2000.
Number of Securities Value of
Underlying Unexercised Unexercised
Shares Options at In-the-Money Options
Acquired Value Fiscal Year-End(#) at Fiscal Year-End ($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable
Unexercisable
John A. Halbrook 0 $0 214,075 / 35,000 $4,106,479 /
$693,438
C. Phillip Turner 4,000 2,500 68,408 / 15,000 1,317,907 /
297,188
Stephen P. Carter 0 0 66,210 / 13,000 1,202,471 /
257,563
Ronald E. Fulkrod 0 0 17,582 / 8,000 383,156 /
158,500
Thomas A. Gendron 0 0 30,824 / 8,000 587,518 /
158,500
LONG-TERM MANAGEMENT INCENTIVE COMPENSATION PLAN AWARDS
See "Compensation Committee Report on Executive Compensation" for a
description
of the Long-Term Management Incentive Compensation Plan (LTMIC). The LTMIC was
approved by the Board of Directors at their meeting on September 22, 1999. The
following table shows, for the named executive officers, the calculated future
payouts, if any, under the LTMIC for the two-year performance cycle and three-
year
performance cycle both of which began in fiscal year 2000. Threshold amounts
are the
minimum amounts payable under the LTMIC provided that the minimum level of
performance is achieved with respect to the pre-established performance
objectives,
measured in terms of the Company's cumulative earnings per share and return on
average invested assets for that two-year or three-year cycle. If such
performance
is not achieved, amounts would be zero.
LONG TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
NUMBER OF PERFORMANCE OR
SHARES, OTHER PERIOD ESTIMATED FUTURE PAYOUTS UNDER
UNITS, OR UNTIL NON-STOCK PRICE-BASED PLANS
OTHER MATURATION OR
NAME RIGHTS PAYOUT THRESHOLD TARGET MAXIMUM
John A. Halbrook - 2 Years (1) $22,435 $224,350
$448,700
Stephen P. Carter - 2 Years (1) 8,360 83,600
167,200
C. Phillip Turner - 2 Years (1) 9,288 92,880
185,760
Ronald E. Fulkrod - 2 Years (1) 6,738 67,376
134,752
Thomas A. Gendron - 2 Years (1) 6,959 69,588
139,176
John A. Halbrook - 3 Years (2) 20,192 224,350
448,700
Stephen P. Carter - 3 Years (2) 7,524 83,600
167,200
C. Phillip Turner - 3 Years (2) 8,359 92,880
185,760
Ronald E. Fulkrod - 3 Years (2) 6,064 67,376
134,752
Thomas A. Gendron - 3 Years (2) 6,263 69,588
139,176
Amounts shown in this table were calculated using the salaries for the named
executive officers in the LTMIC as of the beginning of the performance period.
(1) Performance Period October 1, 1999 through September 30, 2001.
(2) Performance Period October 1, 1999 through September 30, 2002.
CERTAIN TRANSACTIONS
See "Compensation Committee Interlocks and Insider Participation."
AUDIT COMMITTEE REPORT TO SHAREHOLDERS
Effective January 31, 2000, the Securities and Exchange Commission adopted new
rules
and amendments to current rules relating to the disclosure of information about
companies' audit committees. The new rules require that, for all votes of
shareholders occurring after December 15, 2000, the proxy statement must
contain
a
report of the audit committee addressing several issues identified in the
rules.
In
addition, the SEC recommends that audit committees adopt written charters. Any
such
charter must be included as an attachment to the proxy statement at least once
every
three years. Therefore, the Charter of the Audit Committee of the Board of
Directors
of Woodward Governor Company, revised as of March 2000, is included in this
proxy
statement as Exhibit B.
Consistent with Nasdaq's independent director and audit committee listing
standards,
as amended on December 14, 1999, and in accordance with the Committee charter,
all
members of Woodward's Audit Committee are independent directors.
Audit Committee Report
The Audit Committee recommended to Woodward's Board of Directors that the
consolidated balance sheets of the Company at September 30, 2000 and 1999, and
the
related statements of consolidated earnings, shareholders' equity and cash
flows
of
the Company for each of the three years ended September 30, 2000, be
included in
the
Company's Annual Report on Form 10-K to be filed with the Securities and
Exchange
Commission for the year ended September 30, 2000. This recommendation
was based
on
the Committee's review and discussion of the audited financial statements with
management and discussions with PricewaterhouseCoopers LLP, the independent
accountants who audited the financial statements.
The Committee has discussed with PricewaterhouseCoopers LLP the matters
required
to
be discussed under Statement of Auditing Standards No. 61 in connection with
their
audit. The Committee also discussed with PricewaterhouseCoopers LLP their
independence and received from them the written disclosures and the letter
required
by Independence Standards Board Standard No. 1.
Audit Committee: J. Peter Jeffrey, chairman
J. Grant Beadle
Vern H. Cassens
Thomas W. Heenan
Michael T. Yonker
INDEPENDENT PUBLIC ACCOUNTANTS
In 2000, PricewaterhouseCoopers LLP served as Woodward's independent public
accountants. The Board intends to reappoint them for the fiscal year ending
September 30, 2001. We anticipate a representative from PricewaterhouseCoopers
LLP
will be present at the annual meeting and available to answer appropriate
questions.
SHAREHOLDER PROPOSALS
If you want to submit a proposal for possible inclusion in our proxy statement
for
the 2002 Annual Meeting of Shareholders, you must ensure your proposal is
received by
us on or before August 8, 2001.
If you intend to present a proposal to shareholders, but do not want it
included
in
the proxy statement, management's proxies for that meeting will be entitled to
exercise their discretionary authority on that proposal unless we receive
notice
of
your proposal no later than October 22, 2001. Even if we receive proper notice
before
October 22, 2001, the proxies may still exercise their discretionary authority
on the
proposal by telling shareholders about the proposal and how they intend to vote
on
it, unless you solicit proxies for the proposal as required by Rule 14a-4(c)(2)
under
the Exchange Act.
OTHER MATTERS
Woodward is soliciting this proxy on behalf of its Board of Directors. This
solicitation is being made by mail, but also may be made by telephone or in
person.
The Company will pay the regular charge of brokers and other nominees who hold
shares
of record for forwarding proxy material to the beneficial owners of such shares.
We do not know of any matters to be acted upon at the meeting other than those
discussed in this statement. If any other matter is presented, proxy holders
will
vote on the matter in their discretion.
By Order of the Board of Directors
WOODWARD GOVERNOR COMPANY
Carol J. Manning
Corporate Secretary
December 6, 2000
EXHIBIT A
SECTION 2.8 OF THE BYLAWS REQUIRING WRITTEN NOTICE
SECTION 2.8 NOMINATIONS FOR DIRECTOR. Nominations for election to the Board of
Directors may be made by the Board of Directors or by any stockholder entitled
to
vote for the election of directors. Nominations other than those made by the
Board of
Directors shall be made by notice in writing, delivered or mailed by registered
or
certified United States mail, return receipt requested, postage prepaid, to the
Secretary of the Corporation, not less than 20 days nor more than 50 days prior
to
any meeting of stockholders called for the election of directors; provided,
however,
if less than 21 days' notice of the meeting is given to stockholders, such
written
notice shall be delivered or mailed, as prescribed, not later than the close of
business on the seventh day following the day on which the notice of
meeting was
mailed to the stockholders. Each such written notice shall contain the
following
information:
(a) The name and residence address of the stockholder making the
nomination;
(b) Such information regarding each nominee as would have been required
to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated by the
Board of Directors; and
(c) The signed consent of each nominee to serve as a member of the Board
of
Directors if elected, and the signed agreement of each nominee that if
elected he or she will be guided by the philosophy and concepts of human
and industrial association of the Corporation as expressed in its
Constitution in connection with the nominee's service as a member of the
Board of Directors.
Unless otherwise determined by the Chairman of the Board of Directors or by a
majority of the directors then in office, any nomination which is not made in
accordance with the foregoing procedure shall be defective, and any votes which
may
be cast for the defective nominee shall be disregarded.
EXHIBIT B
Charter of the Audit Committee of the Board of Directors
of Woodward Governor Company
Responsibilities
The Audit Committee oversees and monitors management's and the independent
auditors'
participation in the financial reporting process. In this role, the committee
is
responsible for performing the following:
? Recommend to the Board of Directors the appointment of the independent
auditors
based on an evaluation of the auditor's independence and other matters
? Review and discuss with management their plans related to internal
audit/risk
assessment activities and the results of those activities
? Review and discuss with management the audited financial statements
? Discuss with the independent auditors any matters required to be discussed
under
Statement of Auditing Standards No. 61
? Obtain from the independent auditors the written disclosures and the
letter
required by Independence Standards Board Standard No. 1; discuss with the
auditors
any disclosed relationships or services that may impact the objectivity and
independence of the auditors; and take appropriate actions with respect to the
independence of the auditors
? Recommend to the Board of Directors, based on reviews and discussions
referred to
in the preceding three items, that the audited financial statements be included
in
the Company's Annual Report on Form 10-K
? Review with management and the independent auditors the Company's
quarterly
financial statements prior to filing of its form 10-Q, if necessary
? Provide a report in the Company's proxy statement as requested by the
Securities
and Exchange Commission
The Company's independent auditors are appointed by the Board of Directors and
are
ultimately accountable to the Board and the Audit Committee, as representatives
of
the shareholders.
Membership
The Audit Committee is to consist of three or more members of the Board of
Directors,
one of whom is to be elected chairperson. Each member of the committee
is to be
an
"independent director" as defined under the rules of the Nasdaq National Market
and
must be able to read and understand fundamental financial statements, including
a
balance sheet, statement of earnings and statement of cash flows. At least one
member of the committee must have past employment experience in finance or
accounting
or comparative experience or background that results in the individual's
financial
sophistication.
Meetings
The Audit Committee is to meet two or more times each fiscal year. The
Committee
chairperson will determine meeting agendas and will involve or exclude
management and
independent auditors as considered appropriate to fulfill the Committee's
responsibilities. Minutes of each meeting are to be prepared and approved at a
subsequent meeting. Minutes are to be distributed to committee members and the
Chairman of the Board of Directors, and are to be made available to all Board
members.
* * *
The adequacy of this Charter is to be reviewed and reassessed by the Committee
annually and will be included in the proxy statement every three years.
March 2000
ANNUAL MEETING OF SHAREHOLDERS OF
WOODWARD GOVERNOR COMPANY
January 24, 2001
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control
number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
YOUR CONTROL NUMBER IS ______________________
Please Detach and Mail in the Envelope Provided
_X_ PLEASE MARK VOTES
AS IN THIS EXAMPLE
1. ELECTION OF DIRECTORS __ __ __ 2. In their discretion, the proxies
are authorized to vote upon such
other matter as may properly come
Vern H. Cassens before the meeting.
Thomas W. Heenan
Michael H. Joyce
Lou L. Pai A majority of said attorneys
or proxies who are present at
INSTRUCTIONS: To withhold authority the meeting shall have, and may
to vote for any individual nominee, exercise, all of the powers of
mark the "For All Except" box all said attorneys or proxies
and strike a line through the hereunder.
nominee's name in the list provided
above. Your shares will be voted PLEASE MARK, SIGN, DATE AND RETURN
THIS
for the remaining nominees. PROXY CARD USING THE ENCLOSED ENVELOPE.
Signature__________________ Signature if held jointly ______________ Dated
________
NOTE: Please sign exactly as name appears hereon. When shares are held by
joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign
in full corporate name by President or other authorized officer. If a
partnership,
please sign in partnership name by authorized person.
PROXY PROXY
WOODWARD GOVERNOR COMPANY
Proxy for Annual Meeting of the Shareholders - January 24, 2001
Solicited by the Board of Directors
The undersigned hereby appoints J. Grant Beadle, Vern H. Cassens and John A.
Halbrook, as the undersigned's proxy, with full power of substitution, to
represent
and to vote, as designated on the reverse side, all the undersigned's common
stock in
the Woodward Governor Company at the Annual Meeting of Shareholders to be held
on
Wednesday, January 24, 2001, and at any adjournment thereof, with the same
authority
as if the undersigned were personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY
THE
UNDERSIGNED SHAREHOLDERS. IF NO SPECIFICATION IS MADE, THIS PROXY WILL
BE VOTED
IN
THE DISCRETION OF THE NAMED PROXIES ON ALL MATTERS. THE BOARD FAVORS A VOTE
"FOR"
THE ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS.
TOTAL RETURN TO SHAREHOLDERS
Starting
Basis
Description 1995 1996 1997 1998 1999 2000
Woodward Governor Company $100.00 $148.16 $227.16 $154.19
$173.74 $321.20
S&P SmallCap 600 $100.00 $115.31 $157.94 $128.45 $150.98
$187.47
S&P Manufacturing Div $100.00 $128.82 $179.32 $161.68 $253.41
$250.53
Starting
Basis
Description 1995 1996 1997 1998 1999 2000
Woodward Governor Company $100.00 $148.16 $227.16 $154.19
$173.74 $321.20
S&P 500 $100.00 $120.34 $169.01 $184.30 $235.24 $266.49
S&P Mach Div $100.00 $130.47 $182.84 $131.22 $173.24
$135.57
Assumes that the value of the investment in the Company's Common Stock and each
index
was $100 on September 30, 1995 and that all dividends were reinvested.
